Rank Group has said that its Spanish casino and online gaming businesses lost €7.1 million to payment fraud. The company, led by chief executive John O’Reilly, has reported the case to the police.

In a statement released on 22 December, Rank said it is also carrying out its own investigation with help from an outside law firm. Because of the exceptional nature of this incident, the company plans to list the loss as a separate item in its financial reports. It did not explain how the fraud happened but said it is taking steps to fully understand the problem and stop it from happening again. 

Analysts say impact is limited

Market experts say that although the issue is serious, it is not expected to affect Rank’s bigger business plans. Peel Hunt said the company still has enough cash and called the fraud unwelcome but of modest impact.

Peel Hunt analysts Ivor Jones and Douglas Jack added, “Rank is following the path of other companies hit by payment fraud, and intends to tighten controls further. Happily, the group is in a financial position to absorb the cost and continue with its plans. We reiterate our Buy recommendation and 175p target price.”

They also said it is unlikely that Rank will get back the stolen money. They believe that, under the company’s current systems, no large payment can be made without approval from the chief financial officer or the group finance director.

New tax rules add to pressure

The fraud news comes at a challenging time for Rank. In the recent Autumn Budget, the UK government increased the Remote Gaming Duty by 40 percent and the General Betting Duty by 25 percent. These changes affect Rank and many other companies in the UK gaming sector.

Rank said the new taxes are expected to reduce its operating profit by £40 million before any steps are taken to lessen the impact. This includes a £46 million hit from the duty rises, partly offset by £6 million saved from the removal of bingo duty. These tax changes put pressure on the group’s business in the UK and internationally.

CEO warns of heavy blow

Commenting on the Budget, Rank chief executive John O’Reilly said, “The announced increase in Remote Gaming Duty in the UK Budget represents a very significant blow to the regulated betting and gaming industry in the UK.”

He added, “Whilst we are pleased that the government has abolished bingo duty which will help to sustain jobs and investment in the land-based sector, the far more significant impact on the group is the hit to digital profitability.” As Rank investigates the Spanish fraud, the company now has to manage stricter controls, higher taxes, and ongoing investment plans.